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by Mike Caswell

The Canadian Investment Regulatory Organization of Canada has imposed a $2-million fine and ordered other payments totalling $6.7-million (U.S.) against Fortrade Canada Ltd. for improperly pitching trades to clients. CIRO says that Fortrade employees called unsophisticated clients and told them about "opportunities" that could produce returns of 20 per cent or more. The pitch included telling clients that they could be missing out on profitable trades and encouraging them to deposit money to their accounts, CIRO says.

The penalties for Fortrade are contained in a decision that CIRO released on Monday, March 11. The sanctions include a $2-million fine, the payment of $703,478 (U.S.) to resolve client complaints and $6-million (U.S.) toward a fund for clients who make a future claim. Fortrade has further agreed that it will retain recordings of phone calls with clients for a seven-year period.

The sanctions stem from a case in which CIRO cited Fortrade for soliciting customers who had accounts that are designated order execution only, or OEO. Such clients typically enter their own trades, and are subject to rules that prevent firms from making recommendations. The majority of the clients were unsophisticated, had income of less than $50,000, had liquid assets of less than $25,000 and had limited trading knowledge, CIRO says.

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